We recently compiled a list of the Jim Cramer is Talking About These 12 Stocks. In this article, we are going to take a look at where Nucor Corporation (NYSE:NUE) stands against the other stocks Jim Cramer is currently talking about.
On Tuesday, Jim Cramer, the host of Mad Money, analyzed the day’s market activity, shedding light on why some Big Tech stocks gained traction while others struggled. He pointed out that investors are increasingly concerned about the broader economic effects of rising bond yields. Cramer began by questioning how a day could unfold where recent market leaders lose their momentum, prompting money managers to shift back to established favorites like Big Tech.
Cramer acknowledged his growing worry about the bond market, noting that since the Federal Reserve cut rates last month, bond prices have plummeted.
“… Ever since the Fed cut rates last month, right, bond prices have plunged. Bond yields, meaning longer-term interest rates, have soared. Not supposed to happen. But when it does happen, money managers reach for the companies that simply aren’t impacted by the change in the 10-year, the 20-year, or the 30-year US Treasurys.”
Cramer likened Wall Street to Chinatown, suggesting that sometimes, it defies easy understanding. He remarked that people seem to abandon the market’s recent winners in a snap as if discarding hot fries. He then explained that the day’s disappointing earnings reports created confusion, as they didn’t align with the prevailing narrative of strong employment alongside rate cuts.
“See, this morning we got a series of earnings reports that just didn’t add up. They didn’t fit the thesis. They were disappointing. They don’t jive with a rather benign moment when we have the Fed cutting rates, yet employment remains strong. When we get these problematic quarters, several in one day, I might add, money managers default back to the tried and true growth stories that we all know and love. Yes, Titans of Tech. You know what? These managers can’t help themselves. They feel they have to rotate out of what was hot at one point and into something else that’s not that impacted by the big rate-cut cycle.”
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He addressed the “alleged earnings disappointment,” clarifying that he chose the term “alleged” because he holds these companies in high regard and does not want to undermine their reputations. Cramer stated that when the 10-year Treasury yields rise, money flows back to these tech giants. He noted that on days like Tuesday, large investors often become apprehensive about cyclical stocks, with concerns about various sectors like aerospace, home building, and even auto parts.
He reassured viewers that this phenomenon is familiar; it has been a recurring theme for over a decade. Cramer suggested that money could just as easily rotate back to previous favorites, but it might take a day or two for that to happen, which shows the volatility of the current market environment.
Concluding, Cramer noted that Big Tech experienced a significant resurgence. He remarked:
“But the bottom line, Big Tech made a big comeback today because of the bond market, not anything to do with the stocks themselves. So, keep in mind that the pause in the rally is temporary, even as you should still own some of the Magnificent Seven for diversification.”
Our Methodology
For this article, we compiled a list of 12 stocks that were discussed by Jim Cramer during his episode of Mad Money on October 22. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a worker inspecting a galvanised sheet steel product in a well-lit warehouse.
Nucor Corporation (NYSE:NUE)
Number of Hedge Fund Holders: 40
Cramer called Nucor Corporation (NYSE:NUE) “America’s best steel company”. Expounding on what happened after the company released its earnings on October 21, he said:
“Last night, Nucor reported and the market was not impressed. The stock ended up plunging $10 or 6.5% today. That’s unfortunate because this company’s a great bellwether for the whole material sector. And after what we heard last night, it’s clearly gonna take some time before these stocks can rebound after one rate cut. Now, Nucor’s results weren’t exactly a surprise. The company issues rough earnings guidance about two weeks before the end of every quarter.
That was a month ago. And this time, management pre-announced some disappointing earnings per share figures.
Wall Street was looking for a buck 73 per share, the management said it was expecting more than a dollar, maybe a dollar 30, a dollar 40 thanks to lower pricing caused by weak demand from a host of end markets like autos, farm equipment, and household appliances. But a funny thing happened here after that pre-announcement, it didn’t seem to matter to the stock. See, even before we got those numbers, Nucor’s stock had already fallen 34% from its highs in April to its lows in mid-September.”
Cramer highlighted how investors were “already circling on this one over a month ago, betting that it was ready to bottom”. He went on to say:
“And of course, it’s not a coincidence that the stock bottomed on September 11 right before the Fed leaked that we’ll likely get a 50 basis point double rate cut. Once we heard that, the stock caught fire because who cares about the current quarter when the Fed’s about to become our best friend again? Everybody knows the industrials benefit from rate cuts so they were willing to look past the weakness in the third quarter. But apparently they’re actually not willing to look past weakness in the fourth quarter, which is what we heard about last night and that’s what torpedoed the stock today.
It’s kind of a rude awakening. See, the headline numbers for the reporting quarter were slightly better than expected after last month’s hideous pre-announcement. Even though Nucor’s business is down substantially year-over-year, thanks in large part to weak pricing, they still delivered a clean revenue beat.”
Cramer mentioned that Nucor (NYSE:NUE) reported earnings of $1.49 per diluted share, 9 cents more than the high end of the pre-announcement, while the figure was 2 cents lower than what the analysts were expecting.
“Those third-quarter numbers were awful in absolute terms though, but everybody knew they’d be bad and nobody let that bother them for the past month. So what changed here? The outlook. Unfortunately, Nucor’s guidance for the current quarter was quite disappointing. Management made some grim comments on the conference call.
For the fourth quarter especially, Nucor said that its unadjusted earnings per share will be down from the third quarter they just reported, definitely less than a buck o five [$1.05] per share. Their steel mills in their finished product business are being hit by weaker volumes and lower average selling prices. Still, the only bright spot is the raw materials side of the business where volumes and pricing are stable while costs are coming down but it’s not enough to move the needle. What’s going wrong here? Aside from weakness in key end markets like construction, manufacturing, autos, management called out election uncertainty, geopolitical concerns, product delays, tight lending requirements, and elevated levels of imports for certain steel products.”
Calling the above a “parade of horribles”, Cramer went on to say:
“To be fair, Nucor also did call out some potential catalysts that could turn things around like more rate cuts, pent-up demand for residential commercial construction, and an extremely soft landing for the economy.
But there’s a reason they’re potential catalysts and not actual catalysts. It’s because they haven’t happened yet. Through it all, though, Nucor reaffirmed that they’ve been navigating economic cycles for five decades and emerged stronger every time. And I can tell you, that is definitely true, but it’s also cold comfort if the fourth quarter is gonna be worse than the third quarter.
When Nucor held its conference call this morning, it was a bit of a mixed bag and CEO Leon Topalian’s prepared remarks… I’m gonna quote here ‘The Federal Reserve’s recent actions are a good start, but it will likely take more time, more rate relief, and looser lending conditions before we start to see the flow through effect in the construction, industrial, and consumer durables market that are so impactful to steel demand.’
On the other hand, he called out several markets that do remain quite healthy, including construction related to semiconductor factories, advanced manufacturing facilities, data centers of course, and institutional buildings. Basically, the Fed is Nucor’s friend. But given the nature of the steel business, it takes a few more rate cuts for the friendship to really kind of bond, kick in. Looking into next year and beyond, Topalion pointed to all sorts of things that could turn around things for the steel industry. I agree with him, I think it’ll turn, but that doesn’t necessarily mean that stock’s worth buying on weakness right now.
Ultimately, there’s a reason the stock plunged 6.5% today. I don’t think Nucor is really doing anything wrong at all. I was just hoping we see more signs that materials space is turning, especially after all the bottom calls we heard over the past couple of months. But the turn clearly isn’t here yet. We probably need more rate cuts before I know I feel comfortable pounding the table on the steel or the other material stocks.”
Cramer mentioned that he thought it was the right time to buy the stock but has become circumspect after the earnings call.
“Now, if you’re willing to look a bit further in the future then I do think Nucor is worth buying on weakness. However, I’m starting to get a little concerned by this relentless rise in longer-term interest rates ever since the rate cut from the Fed last month. Yesterday we got conflicting messages from the Fed. Mary Daly, president of the San Francisco Fed, she says she doesn’t see a reason to stop cutting rates, but then Minneapolis Fed president Neel Kashkari says he favors a slower pace of rate cuts. He’s currently a non-voting member, still influential.
Personally I’m confident in the Fed. I believe that they’ve tamed inflation. However, we might not get true clarity on the rate hike front or a cut front until after the election. Both candidates have potentially inflationary policies but in different ways and to different extents. Two days after the election, we’ll learn the outcome of the next Fed meeting. Might be worth putting Nucor on hold until we know more, that’s how I’m approaching it. As much as I would like to tell you to dive into Nucor here, because I’ve loved it so long… But after last night’s update, I’m a little less sanguine.”
Cramer said that the weak quarter wasn’t surprising but the guidance was, which makes it harder for him to root for the company presently. He concluded by saying:
“If I had to decide today, I’d still guess that the Fed keeps cutting, rates come down in 2025, and cyclicals like Nucor and the rest of the materials stocks can be big winners. But you know what, we don’t have to decide that today. Given that the situation’s uncertain, we can keep watching and gathering information for the next couple of weeks. Won’t be too late to make a decision on Nucor when we know more about where we’re headed. But I am again concerned. I know I was premature in thinking it could bottom today. It didn’t. I gotta wait and see.”
Nucor (NYSE:NUE) manufactures and sells a variety of steel products, serving customers across North America. The company also engages in raw materials production and processing, providing essential materials for steel manufacturing and other industries. During the first 9 months of 2024, the company announced consolidated net earnings of $1.74 billion, or $7.22 per diluted share. This contrasts with consolidated net earnings of $3.74 billion, or $14.83 per diluted share, for the same period in 2023.
Overall NUE ranks 10th on our list of the stocks Jim Cramer is currently talking about. While we acknowledge the potential of NUE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NUE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.